Opinion of the European Economic and Social Committee on ‘Modern Business Responsibility — Avenues for elevating MSMEs’ ability for successful transformation’ (own-initiative opinion)
Date: 2023-10-25
Institutions: European Economic and Social Committee
Subjects: aid to undertakings, business continuity, company growth, corporate social responsibility, cultural pluralism, digital economy, digital transformation, energy efficiency, entrepreneurship, green economy, small and medium-sized enterprises








C_202400868EN.000101.fmx.xml












Official Journal of the European Union


EN
Series C













C/2024/868


6.2.2024






Opinion of the European Economic and Social Committee on ‘Modern Business Responsibility — Avenues for elevating MSMEs’ ability for successful transformation’
         
(own-initiative opinion)
(C/2024/868)







Rapporteurs:



Milena ANGELOVA


Rudolf KOLBE


Ferre WYCKMANS











Plenary assembly decision


25.1.2023




Legal basis


Rule 52(2) of the Rules of Procedure
Own-initiative opinion




Section responsible


Single Market, Production and Consumption




Adopted in section


3.10.2023




Adopted at plenary


25.10.2023




Plenary session No


582




Outcome of vote
(for/against/abstentions)


215/1/5




1.   Conclusions and recommendations









1.1.


Modern business responsibility of MSMEs (1) refers to a proactive and voluntary approach of an enterprise to economic, social and environmental sustainability and its level of ambition with respect to exceeding its legal obligation. A successful enterprise integrates all these dimensions in its strategy and everyday operations. Business responsibility is primarily a mindset stemming from an enterprise’s own values and objectives while taking into account the expectations of stakeholders and society at large.












1.2.


The various dimensions of responsibility are inseparable but each of them has a specific role: economic responsibility refers to good economic performance, based on competitiveness and profitability, as well as integrity in financial and fiscal affairs. Social responsibility covers responsible relations of the enterprise with its stakeholders, including employees, consumers, local communities and business partners. Social dialogue and communication with external stakeholders play an important role here. Environmental responsibility encompasses proper management of issues related to climate change, pollution, biodiversity and natural resources.












1.3.


The most essential aspects to be considered by a particular enterprise are determined by its size, type, sector, business model, position in the value chain, location and markets. There is no one-size-fits-all solution and this shall be reflected either by the SME definition or in the respective frames. The content of business responsibility also evolves with time, thereby reflecting and ensuring proactive and forward looking management of long-term digital, green and demographic developments, as well as the need for resilience to cope with sudden crises.












1.4.


MSMEs need a great deal of support and encouragement to manage the broad entirety of business responsibility. Business organisations in all their forms play an important role in awareness-raising. To ensure the necessary skills and competences, learning/training alliances of MSMEs must be promoted and facilitated, and cooperation must be enhanced between labour market institutions, social partners, professional chambers and associations, and various training entities and CSOs. High-quality professional support services also need to be easily accessible.












1.5.


The European Economic and Social Committee (EESC) calls for simple and practical tools such as checklists, templates and calculators, and alternative scenario analysis to be developed and provided for MSMEs to enhance and help develop their operations and to report on their responsibility commitments and achievements. The EESC also encourages the European Commission (EC), in cooperation with Member States and business support organisations, to constantly raise awareness of the benefits of responsible performance and to maintain and update a collection of good practices of business responsibility in MSMEs.












1.6.


The EESC considers it crucial to ensure that the overall policy framework is supportive for MSMEs and avoids complicated requirements — met by MSMEs either directly or through value chains — which may divert resources away from concrete, grass-root level business responsibility measures and result in the ‘externalisation’ of business responsibility in MSMEs. In this respect, due attention must be paid to, for example, the reporting requirements. The EESC also welcomes the intention of the European Commission to launch a public consultation before the end of the year on a non-financial reporting standard applicable to MSMEs on a voluntary basis with the view to adopt it in 2024 and calls for it to be clear and simple, in line with the principle embedded in SME Relief package (2).




2.   Introduction









2.1.


MSMEs form the overwhelming majority of the European business community — they make up 99,8 % of all non-financial enterprises and 2/3 of private sector jobs in the EU-27. 80-90 % of them are micro enterprises (3). They are therefore the real engine of the sustainability transformation, and the key factor in its success, if they are motivated and supported to embed a holistic approach to sustainable and responsible business in their operations. The boosting of social economy enterprises is an additional element in this context.












2.2.


The objective of this own-initiative opinion is, building on previous EESC opinions (4), to explore and describe the principal elements, drivers and good practices of future-proof business responsibility in MSMEs, paying particular attention to enterprises most in need of help and support. The aim is to outline and suggest how best to encourage and promote responsible business and entrepreneurship, including measures to ensure the availability of the required professional expertise within or outside MSMEs.




3.   Drivers and elements of modern business responsibility









3.1.


Modern business responsibility builds on economic, social and environmental foundations, in line with the principles of sustainability. It is embedded by the enterprise in its business strategy and everyday operations in a proactive way. It is up to an MSME to decide its level of ambition and to determine, for example, whether it wants to be mainly compliance oriented or even strive for being a frontrunner. Business responsibility thus stems from an entrepreneur’s or enterprise’s own values and objectives, taking into account the expectations of stakeholders and society at large.












3.2.


Responsibility also brings various types of benefits for MSMEs. These include better reputation, higher customer satisfaction and attractiveness as an employer, and access to supply chains and finance. Responsibility is also linked to better risk management and security of business continuity which benefit workers, community and whole society as well.












3.3.


Modern business responsibility is not just about ‘not causing harm’ but — most importantly — it is ‘doing good’, by providing sustainable goods and services, quality jobs, environmental solutions, and contribution to revenues for public services, while also bearing in mind that the neighbourhood proximity of MSMEs in towns and villages increases social cohesion.












3.4.


To be able to fulfil their crucial role in the economy and society, MSMEs need to be economically sound and sustainable. Good economic performance, based on efficiency, profitability and competitiveness, and accompanied by social and environmental responsibility, is necessary to ensure the long-term success of businesses. Economic responsibility also means integrity in terms of fair competition and good governance, excluding grey economy practices, bribery and tax avoidance.












3.5.



Social and societal responsibility refers to an enterprise’s relations with its wide variety of stakeholders, including employees, consumers, local communities and business partners. It means maintaining ethical behaviour and respect and promote for human rights in all these relations and actively taking care of motivating, developing and building a long-term relation with employees through promoting constant upward career pathways making use of social dialogue. Responding to all such expectations is challenging, as stakeholders vary greatly, as do the conditions in which enterprises operate, ranging from their local environment to circumstances outside the EU. Open dialogue with external stakeholders, on top of social dialogue, is thus an essential feature of modern business responsibility, while mutual responsibility needs to be followed by all stakeholders participating in dialogue and cooperation.












3.6.



Environmental responsibility means good environmental performance, in terms of mitigating climate change and environmental pollution, protecting biodiversity and preserving natural resources. Environmental responsibility often goes hand in hand with the efficiency of business operations and cost management, and increasingly also with seizing new business opportunities.












3.7.


The interlinkages between the economic, social and environmental dimensions of responsibility highlight the importance of integrating them all together to ensure responsible business conduct in its entirety. This is the only possible way of responding to the expectations of different stakeholders, from owners and business partners to employees and their organisations, consumers and society at large.












3.8.


According to a report by the EC (5), SMEs pay most attention to responsibility action related to employees and consumers. A large proportion are also involved in environment-related responsibility practices.












3.9.


While the basic elements of business responsibility are common for all, the most essential aspects to be considered by a particular MSME are determined by its specific nature and its operating environment. Size, type, sector, business model, position in the value chain, customers and markets, and geographic location all have an influence on the practical forms of business responsibility. The current definition of ‘SME’ cannot capture this diversity (6). This is why every MSME must evaluate by itself — taking into account the expectations of stakeholders — what responsibility means for its own operations in practice. Professional organisations and chambers play an important role in supporting the identification of the essentials and the implementation of the necessary tools.












3.10.


Some MSMEs gear their purpose specifically towards social and environmental aspects and may be non-profit entities. These social economy enterprises often provide jobs that help young, older and disadvantaged people integrate into the labour market and into society. They may focus on care services or circular economy related services, among others (7).












3.11.


The content of business responsibility also evolves with time, reflecting geopolitical, economic, societal, technological and environmental developments. These include both long-term transitions and sudden incidents. In addition to challenges, these developments generate new opportunities and can thus also stimulate responsibility.












3.12.



Digital transformation entails several aspects of responsibility and opportunities. Data sharing is essential to generate innovation and economic added value, which requires trust and supportive ecosystems between business partners, but also proper protection of data and privacy of individuals. There is evidently an ongoing need for upskilling — both for owners/managers and for employees — to enable them to grasp the opportunities of rapid digitalisation. Particular learning and training arrangements are best to be agreed bilaterally by means of social dialogue. Moreover, digitalisation provides tools for measuring progress on responsibility actions within the enterprise.












3.13.


Due to the underlined need to combat climate change, energy is playing an ever more important role in the responsibility of MSMEs. Improving energy efficiency and replacing fossil fuels contribute not only to the green transition, but also to energy security and affordability. The same applies to materials efficiency, reuse, recycling and all elements of the circular economy. Of all natural resources, water is becoming an increasingly critical resource, and therefore sustainable water use requires close attention by MSMEs. While digitalisation is an important tool in the green transition, the environmental impacts of digitalisation itself must also be well managed.












3.14.



Demographic developments shape business responsibility further. New types of practices are increasingly needed in working life to attract and retain people of different ages and cultures, including labour migrants. Staff diversity is beneficial for business but also entails requirements for management, including new training needs. Proper skills development is necessary to respond to the demand caused by both digitalisation and greening, and by new kinds of jobs in general.












3.15.



Sudden crises, especially the COVID-19 pandemic and Russia’s invasion of Ukraine, have made it clear that resilience (the ability to cope with unprecedented risks and disruptions) is an increasingly important part of business responsibility. The continuity of business in exceptional circumstances is of great value in providing goods and services and safeguarding jobs. This in turn requires good preparedness for different and changing conditions, and support by the public sector and cooperation with stakeholders. As the COVID crisis has shown, social dialogue at various levels plays a positive role in arranging the practical modalities of maintaining activities and employment in times of crisis.




4.   Proactive business responsibility in practice









4.1.


Due to differences in the nature and operating environment of enterprises, business responsibility practices at grassroots level vary. However, concrete examples from various kinds of enterprises show that there are similarities that illustrate prevailing features of and trends in business responsibility.












4.2.


The successful management of business responsibility in any enterprise starts with proper awareness and knowledge of topical issues and trends, making it possible for the enterprise to define how it wants to position itself in terms of business responsibility. For example, the enterprise may make a strategic decision on whether it wants to seek a competitive advantage from business responsibility.












4.3.


The commitment of the entrepreneur or the top management of the enterprise is key to success, while it is equally important that all the workers adopt the approach of responsibility in all of their work. Enterprises may also appoint certain persons to lead the planning and implementation of measures. In case of very small and micro-companies, these activities can be supported by respective SME organisations, branch chambers, associations, etc.












4.4.


While responsibility is part of the overall enterprise culture, concrete efforts are integrated into the various business operations, including the production and trading of goods and services, the procurement of production resources, and the development of products and processes. This requires cooperation between various functions.












4.5.


An important part of business responsibility relates to attracting, motivating and retaining people by taking care of the right skills and their constant development and by providing stable career pathways and working conditions, as well as by engaging in social dialogue at different levels, taking into account the size and diversity of MSMEs and the specific features of national systems.












4.6.


Enterprises use various kinds of tools to help operationalise their responsibility, ranging from value statements and business principles to practical guidelines and management systems. While there are specific tools for various dimensions of responsibility, many enterprises find it most practical to integrate responsibility into their overall business guidelines and management systems. Besides describing their own operations and practices, many enterprises also define what they expect from their business partners or other collaborators. Professional organisations, trade unions and chambers can support MSMEs by providing guidelines and adequate tools.












4.7.


Setting goals and targets is another element in operationalising business responsibility, as it is for business in general. This provides the framework for concrete action, accompanied by proper organisation and scheduling of actions. To follow progress, relevant indicators need to be defined and monitored.












4.8.


In addition to social dialogue between employers and trade unions, interaction by the enterprise with external stakeholders is a central tool to better understand the various expectations. At the same time, it is a means to tell stakeholders about the enterprise’s objectives, actions and achievements in terms of responsibility. The formats used by enterprises to inform and communicate with stakeholders vary a lot: from face-to-face meetings to social media posts and formal reporting.




5.   How to encourage and support business responsibility

5.1.   Improving the capabilities of enterprises









5.1.1.


MSMEs face many kinds of challenges in their efforts to manage all the elements of business responsibility. Many MSMEs lack competences, skills, workers and resources and consider it difficult to integrate responsibility into their working culture and to communicate on its various forms. The requirements and expectations are often perceived as too abstract and far from practical life. MSMEs also find it challenging to collect and make use of data on responsibility.












5.1.2.


This is why MSMEs need a great deal of support and encouragement that can make a real contribution to their efforts. Instead of increasing regulation, there is need to increase awareness, competences and skills within enterprises, and for external actors to provide guidance and expertise. Targeted support is needed by the whole range of MSMEs, from the least advanced to the followers and frontrunners.












5.1.3.


Business organisations in all their forms — including employers’ or SMEs’ organisations, chambers and alliances — play an important role in awareness-raising and in informing enterprises of the need for and benefits of business responsibility. In addition, the wide variety of aspects that need to be covered require different professional expertise, and it is important to ensure the availability of this expertise both within MSMEs and in many cases also through external support.












5.1.4.


Being smaller in size, MSMEs need to be able to form learning/training alliances, which must be promoted and facilitated by labour market institutions and social partners and professional chambers and associations. The definition of practically applicable learning content also requires cooperation with universities and other training entities.












5.1.5.


Appropriate high-quality professional support services need to be easily accessible for MSMEs, bearing in mind that service providers that are MSMEs themselves often understand best the needs of the MSME clients. These services can be supported by the cooperation programmes of social partners and professional chambers and associations.












5.1.6.


Modern business responsibility requires the flexible adaptation of continuing professional development (CPD) measures, for MSMEs themselves but also for supporting liberal professional services, and need to become an integral part of establishment-support programmes.












5.1.7.


Sectoral, regional and European funds specifically aimed at educating and training business leaders and employees are vital in promoting the accessibility of initiatives, which are too often aimed at larger companies.




5.2.   Providing guidance, tools and examples of good practices









5.2.1.


Given that the resources of MSMEs are badly needed for doing business, complicated and burdensome formal systems are not the way to help them progress in business responsibility. More simple and flexible tools such as checklists and templates are better suited to smaller enterprises. All these shall help MSMEs comply with legislative requirements, in line with the commitment of the SME Relief package (8).












5.2.2.


The EESC acknowledges the checklist (9) published by the Commission which provides tips for enterprises on developing their responsibility strategy, concrete actions in various responsibility areas, allocation of resources, setting targets and monitoring progress, lists available guidelines, tools and networks to support enterprises. Other good practices can be found, for example, in the BipiZ Platform of Best Practices (10), which covers over 1 200 concrete examples from 600 companies.












5.2.3.


To help MSMEs to communicate on their responsibility to stakeholders, the EESC urges the European Commission to provide a clear and simple online tool, including an easy-to-use CO2 emissions calculator, which is applicable for the purposes of MSMEs. The EESC also welcomes the intention of the European Commission to launch a public consultation before the end of the year on a non-financial reporting standard applicable to MSMEs on a voluntary basis with a view to adopt it in 2024 and calls for it to be clear and simple, in line with the principle embedded in the SME Relief package (11).




5.3.   Creating a supportive policy framework









5.3.1.


Enabling MSMEs to uptake the possibilities of the modern business responsibility — seen as a proactive and voluntary approach of an enterprise to economic, social and environmental sustainability and its level of ambition with respect to exceeding its legal obligation, requires to provide them with simple, clear and predictable legislative framework. It is important to avoid too prescriptive and complicated requirements which divert resources away from concrete, grass-root level measures and may also result in the ‘externalisation’ of business responsibility by MSMEs.












5.3.2.


Specific attention must be paid to requirements that affect MSMEs indirectly. At times, even though MSMEs have been excluded from some regulatory requirements directly, they are targeted indirectly through value chains, via requirements by large customer companies, investors or financiers. In this respect, due attention must be paid to, for example, the reporting requirements. Some regulatory initiatives in turn affect MSMEs via other indirect mechanisms, including through impacts on the prices of energy, materials, and other resources.












5.3.3.


Indirect and multiplier impacts are more difficult to assess and are therefore often not taken properly into account, and the consultation process may ignore MSMEs’ views. In contradiction to the principles of Better Regulation, in such cases MSMEs face uncertainty about the real requirements and consequences of new regulations. Further, when detailed requirements are defined in delegated acts or standards, the factual impacts are not known until a very late stage. All of this leads to an untenable situation for smaller enterprises, which cannot be aware of or prepared for the requirements to come, let alone have the opportunity to influence the requirements in an appropriate way. It is thus crucial to take stock of the current regulatory approach and ensure that regulation fits with the reality of MSMEs in terms of their resources and market position. The EESC calls on Member States to provide assistance, particularly to MSMEs, in a manner that is practical, specific and efficient, framed in a structural cooperation with the representative organisations concerned.






Brussels, 25 October 2023.


The President of the European Economic and Social Committee

Oliver RÖPKE
            





(1)  
            OJ C 486, 21.12.2022, p. 1, point 1.1 defines MSMEs as ‘micro, small and medium-sized enterprises, be they traditional enterprises, family businesses, traders, social economy enterprises, crafts or liberal professions’.

(2)  https://europa.eu/!qvJhxp

(3)  European Commission, 2022, Annual Report on European SMEs 2021/2022 — SMEs and environmental sustainability, April 2022.

(4)  
            OJ C 486, 21.12.2022, p. 1; EESC Ex-post evaluation of Horizon 2020; OJ C 194, 12.5.2022, p. 7, OJ C 286, 16.7.2021, p. 8, OJ C 429, 11.12.2020, p. 210, OJ C 197, 8.6.2018, p. 1, OJ C 288, 31.8.2017, p. 20, OJ C 345, 13.10.2017, p. 15, OJ C 13, 15.1.2016, p. 8, OJ C 311, 18.9.2020, p. 63, OJ C 81, 2.3.2018, p. 1, OJ C 311, 18.9.2020, p. 36.

(5)  Uptake of Corporate Social Responsibility (CSR) by European SMEs and Start-ups: https://europa.eu/!pYbC8P

(6)  As described in OJ C 197, 8.6.2018, p. 1, point 1.3, and in EESC information report on Access to finance for SMEs, point 1.3.

(7)  Commission proposal on developing social economy framework conditions.

(8)  https://europa.eu/!qvJhxp

(9)  https://europa.eu/!rbJwmH

(10)  https://www.bipiz.org/en/

(11)  https://europa.eu/!qvJhxp


ELI: http://data.europa.eu/eli/C/2024/868/oj
ISSN 1977-091X (electronic edition)